Peloton has secured a win in the courtroom. As first reported by Law360, on March 30 a federal judge dismissed a class action lawsuit that had been brought about by a group of investors in 2021. Robeco Capital Growth Funds SICAV – Robeco Global Consumer Trends argued that Peloton intentionally misled investors about the sustainability of demand for Peloton products during the Covid-19 pandemic.
However, last week a judge ruled that Peloton had included the necessary language to warn investors of uncertainty regarding demand, and the plaintiff did not adequately prove deception on the part of Peloton. According to the judge’s ruling:
Far from being “boiler-plate”, as Plaintiff tries to characterize them, these warnings are both specific and realistic about the precise risks factors faced by Peloton as a company—namely that the relaxation of the COVID protocols closures that had promoted the Company’s growth could hamper its future subscriber growth. These warnings are not “garden variety” and do not relate to “any company’s financial well-being.”
The judge also ruled that Peloton noted demand was returning to pre-COVID levels:
Defendants explicitly told the public that demand for Peloton’s products would be returning to pre-COVID levels after the surge in demand it had seen during COVID. Plaintiff’s allegations that Defendants knew that “the sales boom of the 2020 was a COVID-phenomenon, and Peloton would be unable to keep sales at that level throughout 2021 and beyond” is reflected in Peloton’s disclosures to the market. In May 2021, Peloton told investors that sales were “tapering from COVID highs” “[a]s anticipated” and that it was “expecting a gradual return to historical seasonal sales trends.”
The plaintiff group will have an opportunity to refile their lawsuit if they amend their complaints. They must do so by April 28, 2023.
Peloton requested that this lawsuit be dismissed last August. Note that this case was originally titled City of Hialeah Employees Retirement System v. Peloton Interactive, Inc. et al, but it was consolidated into a new name with class action status.
Demand for Peloton products soared during 2020 and 2021, but by early 2022 Peloton had announced they would halt production of new inventory.
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